# In the matter of Harishankar Paper Products Pvt. Ltd.

> NCLT judgment dated 2023-10-04. Citation: TCN-2023-NCLT-01408. The application IA (IBC)/869/2023 was filed by the Liquidator of Hari Shankar Paper Products…

- **Court:** NCLT
- **Order date:** 4 Oct 2023
- **Citation:** TCN-2023-NCLT-01408
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/harishankar-paper-products-pvt-ltd-c17af723

## Summary

### Background

The application IA (IBC)/869/2023 was filed by the Liquidator of Hari Shankar Paper Products Pvt Ltd, the Corporate Debtor (CD), which was admitted into Corporate Insolvency Resolution Process (CIRP) on 13.04.2022 and later approved for Liquidation on 11.11.2022. During CIRP, on 12.07.2022, the Resolution Professional (RP) had appointed a Transaction Auditor (TA) to conduct a transaction audit of CD to analyze transactions falling under Section 66 of the Code. The Transaction Auditor submitted its draft report on 27.12.2022 and final report on 07.02.2023. The suspended directors of CD did not cooperate and failed to provide the documents sought by RP or TA. An application was filed by RP, and by an order dated 26.09.2022, the suspended directors were ordered to

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## Facts

The Liquidator of Hari Shankar Paper Products Pvt Ltd, the Corporate Debtor (CD), filed an application alleging fraudulent transactions. The CD was admitted into CIRP on 13.04.2022 and later approved for Liquidation on 11.11.2022. During CIRP, a Transaction Auditor (TA) was appointed to conduct a transaction audit. The suspended directors of CD did not cooperate and failed to provide documents. The applicant claimed that ex-directors mismanaged the financials, improperly recorded debts, and recklessly utilized funds, leading to the account turning NPA. The applicant identified several transactions as fraudulent, including unsecured loans to related parties (Shiv Shankar Taparia, Ram Kishore Taparia, Rameshwari Devi Taparia, Sarla Taparia) and unrelated parties (Bang

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## Issues and analysis

### Issue 1: Whether the transactions identified by the applicant were fraudulent and intended to defraud …

**Ratio:** Section 66 of the IBC deals with fraudulent or wrongful trading. To invoke this section,

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**Reasoning:** The court examined the transactions identified by the applicant and found no evidence of

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**Interpretation:** Section 66 requires a clear intention to defraud creditors. Mere suspicion or

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**Application:** The court applied the ratio to the specific facts of the case and found that

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## Parties

- **Judges:** Rajeev Bh…; Sanjay…
- **Appellants:** Indiabulls…
- **Respondents:** Hari Shankar…
- **Advocates:** Mano Ra…; M. Rama…

## Timeline

- **2022-04-13 — CIRP Admi…**: Hari Shankar Paper Products Pvt Ltd admitted into Corporate Insolvency Resolution Process…
- **2022-07-12 — Transaction Auditor…**: Resolution Professional (RP) appointed a Transaction Auditor (TA) to conduct a…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 66 — Fraudulent trading or wrongful trading](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-66)

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